Could Rise Another 25%?

Print Email Inc. (NASDAQ: AMZN) has been the model for growth in the e-commerce space and a model for innovation in the tech space. Jeff Bezo’s brainchild has a growth engine that appears to be unmatched, but despite this the stock has been difficult to time in terms of its valuation. One key research firm sees potential for this stock to continue rising — maybe not at this incredible rate that we’ve seen in 2016 — but breaking $1,000 very well could be in the future.

It’s worth mentioning that if you had bought this stock at any time in 2016 before now, you would have made money. And note that correct timing of the stock would have nearly doubled the investment.

Recently the company posted impressive results in the second quarter, yet again. Amazon’s 31% sales growth contrasts with a slow-growth environment for brick-and-mortar retailers, and it was also well ahead of competitors’ e-commerce performance.

While Amazon the retailer has typically low industry margins, the fastest-growing part of the company, Amazon Web Services (AWS), has moved rapidly from loss-leader to delivering above-company margins. Amazon also has a rapid innovation cycle and a knack for leveraging its existing assets into new businesses and markets — two attributes more common to tech companies than retailers.

Argus upgraded Amazon to a Buy rating from Hold with a $935 price target, based on growth prospects. The firm’s valuation work has determined a value for Amazon in range exceeding $1,000. Based on historical comparables analysis and discounted free cash flow valuation, this independent research firm believes Amazon’s growth prospects are accelerating more rapidly than the share price, thus creating a favorable entry point.

The firm expects ongoing volatility in the shares, given the company’s sensitivity to the holiday shopping season and need to invest in growth initiatives such as AWS and Prime. Considering Amazon’s indisputable franchise leadership, its ability to leverage its vendor relationships in the retail space, and its market dominance and superior growth in infrastructure-as-a-service, Argus believes this company warrants long-term accumulation in most equity accounts. Once having established an initial position, the firm says that it would look to add to more holdings on weakness, based on the company’s unique position straddling the consumer discretionary and information technology sectors.

Shares of Amazon closed Friday at $805.75, with a consensus analyst price target of $877.83 and a 52-week trading range of $474.00 to $807.75.

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